<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________________TO ___________________
COMMISSION FILE NUMBER 000-23225
TRANSCOASTAL MARINE SERVICES, INC.
(Exact Name of registrant as specified in its charter)
DELAWARE 72-1353528
(State Or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
3535 BRIARPARK, SUITE 210, HOUSTON, TEXAS 77042
(Address of principal executive offices)
(Zip Code)
(713) 784-7429
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ ] No [ X ]*
*The Registrant became subject to the reporting requirements of Section 13
of the Securities Act of 1934 on October 29, 1997.
The number of shares of Common Stock of the registrant, par value $.001
per share, outstanding at December 12, 1997 was 9,148,441.
<PAGE> 2
<TABLE>
<CAPTION>
Part I - Financial Information
<S> <C>
Item 1 - Financial Statements
General Information.........................................................3
Combined Balance Sheets - TransCoastal Marine Services, Inc.
as of December 31, 1996 and September 30, 1997 and
Pro Forma as of September 30, 1997........................................4
Combined Statements of Operations - TransCoastal Marine Services, Inc.
for the Three-Month Periods ended September 30, 1996 and 1997 and
Pro Forma for the Three-Month Periods ended September 30, 1996 and 1997...5
Combined Statements of Operations - TransCoastal Marine Services, Inc.
for the Nine-Month Periods ended September 30, 1996 and 1997 and
Pro Forma for the Nine-Month Periods ended September 30, 1996 and 1997....6
Combined Statements of Cash Flows - TransCoastal Marine Services, Inc.
for the Nine-Month Periods ended September 30, 1996 and 1997..............7
Notes to the Financial Statements...........................................9
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................13
Part II - Other Information
Item 1 - Legal Proceedings....................................................17
Item 6 - Exhibits and Reports on Form 8-K ....................................18
Signature.....................................................................19
</TABLE>
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<PAGE> 3
TRANSCOASTAL MARINE SERVICES, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
General Information
Transcoastal Marine Services, Inc. ("TCMS" or the "Company") was organized in
April 1996 to become a fully integrated marine construction company focusing on
the transition zone (marsh, swamp, and coastal regions out to water depths of
20 feet) and shallow water (water depths of 20 to 200 feet) regions along the
U.S. Gulf Coast. The Company's goal is to become a leader in the consolidation
of these fragmented segments of the marine construction industry. On November
4, 1997, TCMS acquired in separate transactions (the Acquisitions),
simultaneously with the closing of its initial public offering (the Offering)
of its common stock (the Common Stock), four businesses: The Red Fox Companies
of New Iberia (RFCNI), The Woodson Companies (Woodson), CSI Hydrostatic
Testers, Inc. (CSI), and HBH, Inc. (HBH). With closing of the Acquisitions, the
Company's services now include offshore pipeline installation and repair
services, hydrostatic testing and commissioning of pipelines and fabrication
and refurbishment of components for offshore platforms and drilling rigs.
The consideration for the Acquisitions of the Founding Companies consisted of a
combination of cash, debt and Common Stock. Because (i) the stockholders of the
Founding Companies owned a majority of the outstanding shares of Common Stock
following the Offering and the Acquisitions, and (ii) the stockholders of
Woodson received the greatest number of shares of Common Stock among the
stockholders of the Founding Companies, for financial statement presentation
purposes, Woodson has been identified as the accounting acquiror. The
acquisitions of TCMS, CSI, HBH and RFCNI will be accounted for using the
purchase method of accounting. Therefore the accompanying historical financial
statements as of December 31, 1996 and September 30, 1997 and for the nine and
three-month periods ended September 30, 1996 and September 30, 1997 of Woodson
are presented as the historical financial statements of the registrant. Unless
the context otherwise requires, all references herein to the Company include
TCMS and the Founding Companies.
Operating results for interim periods are not necessarily indicative of the
results for full years. The financial statements included herein should be read
in conjunction with the Pro Forma Combined Financial Statements of the Company
and the related notes thereto, the Financial Statements of TCMS, Woodson, CSI,
HBH and RFCNI and related notes thereto, and management's discussion and
analysis of financial condition and results of operations related thereto, all
of which are included in the Company's Registration Statement on Form S-1 (No.
333-34603), as amended (the "Registration Statement"), filed with the SEC in
connection with the Offering.
TCMS is a Delaware corporation. Its corporate offices are located at 3535
Briarpark, Suite 210, Houston, Texas 77042, and its telephone number is
713-784-7429.
-3-
<PAGE> 4
TRANSCOASTAL MARINE SERVICES, INC.
COMBINED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Historical Pro Forma
---------------------------- -------------
December 31, September 30, September 30,
1996 1997 1997
-------- -------- --------
(Unaudited) (Unaudited)
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,117 $ 1,113 $ 7,660
Accounts receivables, net 1,418 5,864 15,372
Costs and estimated earnings in excess of billings on
uncompleted contracts -- 2,440 4,064
Inventory 243 460 460
Available-for-sale securities, at fair value 1,603 128 128
Other 861 644 1,638
-------- -------- --------
Total current assets 5,242 10,649 29,322
PROPERTY AND EQUIPMENT, net 2,956 4,048 63,816
GOODWILL -- -- 66,465
OTHER 958 90 3,599
-------- -------- --------
Total assets $ 9,156 $ 15,587 $163,202
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 760 $ 3,356 $ 15,220
Notes payable and current maturities of long-term debt 229 1,399 2,460
Payable to founding stockholders 450 -- --
Billings in excess of costs and estimated earnings on
uncompleted contracts -- 54 270
-------- -------- --------
Total current liabilities 1,439 809 17,950
-------- -------- --------
LONG-TERM DEBT -- -- 12,700
DEFERRED INCOME TAXES -- -- 17,283
-------- -------- --------
Total liabilities 1,439 4,809 47,933
-------- -------- --------
STOCKHOLDERS' EQUITY:
Common stock 1 1 9
Additional paid-in capital 122 122 106,540
Retained earnings 7,275 10,619 8,684
Net unrealized gain on available-for-sale securities 319 36 36
-------- -------- --------
Total stockholders' equity 7,717 10,778 115,269
-------- -------- --------
Total liabilities and stockholders' equity $ 9,156 $ 15,587 $163,202
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 5
TRANSCOASTAL MARINE SERVICES, INC.
COMBINED STATEMENTS OF OPERATIONS
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
----------------------------- -----------------------------
For the For the
Three-Months Ended Three-Months Ended
September 30, September 30,
----------------------------- -----------------------------
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE $ 4,277 $ 13,886 $ 18,839 $ 32,012
COSTS AND EXPENSES:
Cost of revenue 3,260 10,616 14,407 23,087
Selling, general and administrative expenses 743 756 1,691 2,468
Depreciation and amortization 154 262 1,506 1,947
----------- ----------- ----------- -----------
Operating income 120 2,252 1,235 4,510
INTEREST EXPENSE (17) (38) (227) (251)
OTHER INCOME (EXPENSE), net 68 (1) (271) (310)
----------- ----------- ----------- -----------
Income before taxes 171 2,213 737 3,949
PROVISION FOR INCOME TAXES 128 164 459 1,737
----------- ----------- ----------- -----------
NET INCOME $ 43 $ 2,049 $ 278 $ 2,212
=========== =========== =========== ===========
PRO FORMA INFORMATION:
Income before taxes $ 171 $ 2,213
Pro forma income taxes 68 885
----------- -----------
Pro forma net income $ 103 $ 1,328
=========== ===========
PRO FORMA INCOME PER SHARE $ .03 $ .24
=========== ===========
SHARES USED IN COMPUTING
PRO FORMA INCOME PER SHARE 9,176,219 9,176,219
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 6
TRANSCOASTAL MARINE SERVICES, INC.
COMBINED STATEMENTS OF OPERATIONS
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
-------------------------- -------------------------
For the For the
Nine-Months Ended Nine-Months Ended
September 30, September 30,
-------------------------- --------------------------
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE $ 14,966 $ 31,990 $ 55,538 $ 86,918
COSTS AND EXPENSES:
Cost of revenue 11,093 25,859 43,728 66,010
Selling, general and administrative expenses 2,222 2,191 4,981 6,408
Depreciation and amortization 445 717 4,510 5,602
----------- ----------- ----------- -----------
Operating income 1,206 3,223 2,319 8,898
INTEREST EXPENSE (23) (83) (674) (724)
OTHER INCOME (EXPENSE), net 207 558 82 (431)
----------- ----------- ----------- -----------
Income before taxes 1,391 3,698 1,727 7,743
PROVISION FOR INCOME TAXES 145 354 1,183 3,590
----------- ----------- ----------- -----------
NET INCOME $ 1,246 $ 3,344 $ 544 $ 4,153
=========== =========== =========== ===========
PRO FORMA INFORMATION
Income before taxes $ 1,391 $ 3,698
Pro forma income taxes 556 1,479
----------- -----------
Pro forma net income $ 835 $ 2,219
=========== ===========
PRO FORMA INCOME PER SHARE $ .06 $ .45
=========== ===========
SHARES USED IN COMPUTING
PRO FORMA INCOME PER SHARE 9,176,219 9,176,219
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE> 7
TRANSCOASTAL MARINE SERVICES, INC.
COMBINED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Historical
For the
Nine-Months Ended
September 30,
------------------
1996 1997
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,246 $ 3,344
Adjustments to reconcile net income to net cash provided by (used in)
operating activities-
Depreciation and amortization 445 717
(Gain) on sale of property, plant and equipment (132) (1)
Realized gains on sale of available-for-sale securities -- (530)
Deferred income taxes (145) (354)
Changes in operating assets and liabilities-
(Increase) decrease in-
Accounts receivable 1,738 (4,446)
Cost and estimated earnings in excess of billings on
uncompleted contracts (5) (2,440)
Inventory (97) (217)
Other current assets (147) 217
Other assets 61 422
Increase (decrease) in-
Accounts payable and accrued expenses 507 2,596
Billings in excess of costs and estimated earnings on
uncompleted contracts (856) 54
------- -------
Net cash provided by (used in) operating activities 2,615 (638)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of capital assets 189 243
Capital expenditures (1,022) (2,051)
Proceeds from sale of investments -- 2,005
Change unrealized gain 157 (283)
------- -------
Net cash used in investing activities (676) (86)
------- -------
</TABLE>
(Continued)
-7-
<PAGE> 8
TRANSCOASTAL MARINE SERVICES, INC.
COMBINED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the
Nine-Months Ended
September 30,
------------------
1996 1997
------- -------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 654 1,855
Principal payments on notes payable (222) (685)
Principal payments on notes payable to shareholders -- (450)
Payment of dividends to shareholders (1,263) --
------- -------
Net cash provided by (used in) financing activities (831) 720
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,108 (4)
CASH AND CASH EQUIVALENTS, beginning of period 852 1,117
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 1,960 $ 1,113
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for-
Interest $ 23 $ 83
Noncash investing and financing activities-
Purchase of assets through assumption of debt -- 1,080
------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE> 9
TRANSCOASTAL MARINE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION:
Background
TCMS was organized in April 1996 to create a fully integrated marine
construction company focusing on transition zone and shallow water regions of
the U.S. Gulf Coast. On November 4, 1997, TCMS acquired, simultaneously with
the closing of the Offering, the Founding Companies (Woodson, CSI, HBH and
RFCNI) for consideration consisting of cash, debt and common stock. The closing
of the Offering also occurred on that date.
For financial statement purposes, Woodson has been identified as the accounting
acquirer. Accordingly, the historical combined financial statements represent
those of Woodson prior to the Acquisitions and the Offering. These combined
financial statements include the accounts of the following Woodson Companies,
which are related by the common ownership of immediate family members acting as
a control group:
Woodson Construction Company, Inc.
Laine Construction Company, Inc.
Kori Corporation
EnviroSystems, Inc.
Pro forma net income consists of the historical net income of the Woodson
Companies, including two S Corporations, adjusted for income taxes that would
have been recorded had each company operated as a C Corporation.
Acquisitions
The Acquisitions were accounted for using the purchase method of accounting.
The allocations of the purchase price to the assets acquired and liabilities
assumed of the Founding Companies have been initially assigned and recorded
based on preliminary estimates of fair value and may be revised as additional
information concerning the valuation of such assets and liabilities becomes
available.
The pro forma financial information for the nine and three-month periods ended
September 30, 1996, and September 30, 1997, includes the results of TCMS
combined with the Founding Companies as if the Acquisitions had occurred at the
beginning of each respective nine or three-month period. The pro forma combined
financial information includes the effects of (i) the Acquisitions, (ii) the
closing of the Offering and the application of net proceeds thereof, (iii)
certain reductions in rent, (iv) the distribution or sale of certain assets
prior to the Acquisitions to the former owners of the Founding Companies and
expenses related thereto, (v) amortization of goodwill resulting from the
Acquisitions using a 40-year estimated life and (vi) advances under the Credit
Facility (see Note 3 to the financial statements) including decreases in
interest expense resulting from the repayment or refinancing of the Founding
Companies' debt. The pro forma financial information may not be comparable to
and may not be indicative of the Company's post-Acquisition results of
operations because (i) the Founding Companies were not under common control or
management and (ii) the Company will use the purchase method to establish a new
basis of accounting to record the Acquisitions.
Interim Reporting
The accompanying unaudited interim financial statements are prepared pursuant
to the rules and regulations for reporting on Form 10-Q. Accordingly, certain
information and footnotes required by generally accepted accounting principles
for complete financial statements are not included herein. The Company believes
all adjustments necessary for a fair presentation of these interim statements
have been included and are of a normal and recurring nature. The interim
statements should be read in conjunction with the financial statements and
notes thereto included in the Registration Statement.
-9-
<PAGE> 10
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
There has been no significant change in the accounting policies of the Company
during the periods presented. For a description of these policies, refer to
Note 2 of Notes to Financial Statements of TCMS and Woodson included in the
Financial Statements in the Company's Registration Statement.
3. CREDIT AGREEMENT:
On October 28, 1997, TCMS entered into a Credit Agreement with Joint Energy
Development Investments, Limited Partnership, an affiliate of Enron Capital &
Trade Resources Corp. (the Lender). The Credit Agreement provides for
borrowings up to $75.0 million, with the initial borrowing availability being
$50.0 million (the Initial Availability) and the remaining $25.0 million being
made available from time to time and in such amounts as the Lender shall
determine in its sole discretion. The Credit Agreement is divided into two
tranches: (a) a senior secured revolving credit facility (the Revolving Credit
Facility), providing for borrowings of up to $60.0 million ($40.0 million of
which comprises part of the Initial Availability) and (b) $15.0 million of
senior subordinated term loan borrowings (the Term Loan Facility) ($10.0
million of which comprises the remainder of the Initial Availability).
Borrowings under the Credit Agreement bear interest at LIBOR plus 275 basis
points (8.37 percent at October 3, 1997), payable quarterly, and borrowings
under the Term Loan Facility bear interest at LIBOR plus 375 basis points (9.37
percent at October 3, 1997), payable quarterly. Borrowings under the Credit
Agreement are secured by liens on substantially all the Company's assets
(including accounts receivable and after-acquired property) and a pledge of the
capital stock of the Founding Companies and each of the Company's other
subsidiaries. Borrowings under the Credit Agreement are intended to be used to
pay a portion of the aggregate purchase price for the Acquisitions and for
general corporate purposes, which may include future acquisitions. The Credit
Agreement requires the Company to comply with various loan covenants, including
(a) maintenance of certain financial ratios, (b) restrictions on additional
indebtedness and (c) restrictions on liens, guarantees, advances and dividends.
The Credit Agreement extends through October 1999 and all outstanding principal
and accrued and unpaid interest under the Revolving Credit Facility and the
Term Loan Facility as of that date is due and payable on that date. The Credit
Agreement contains mandatory prepayment provisions requiring prepayment of
outstanding borrowings from the issuance of debt or equity securities for cash
and any proceeds from other borrowings. In connection with the Credit
Agreement, the Company issued to the Lender a warrant to acquire 175,000 shares
of Common Stock at an exercise price equal to the initial per share price ($18)
to the public in the Offering. The consideration for that warrant was $1,750
and the warrant is exercisable for five years from its date of issuance.
4. CAPITAL STOCK:
Common Stock
In March and April 1997, 175,000 and 100,000 shares of Common Stock,
respectively, were sold to management at $.001 per share. As a result, the
Company recorded a nonrecurring, noncash compensation charge of $2.2 million
effective with the closing of the Offering, representing the difference between
the amount paid for the shares and the estimated fair value of the shares on
the date of sale of such Common Stock.
Common Stock Purchase Warrant
During the first quarter of 1997, the Company entered into an advisory agreement
with an investment banking firm, which was amended in June 1997 to provide for
the sale of a warrant to acquire 50,000 shares of Common Stock (the MG Warrant)
for $.001 per share. The MG Warrant has an exercise price of $8 per share and is
exercisable from time to time, in whole or in part, at any time during the five
year period beginning on the issuance date of the Warrant. of the Offering.
-10-
<PAGE> 11
Offering
On November 4, 1997, TCMS closed on the Offering, which involved the sale by
TCMS of 5,000,000 shares of Common Stock at a price to the public of $18.00 per
share. The net proceeds to TCMS from the Offering (after deducting underwriting
discounts, commissions and offering expenses) were approximately $81.6 million.
On November 4, 1997, the Company completed the sale of an additional 750,000
shares of Common Stock at a price to the public of $18.00 per share (generating
net proceeds to the Company of $12.6 million after underwriting discounts and
commissions) pursuant to an over-allotment option granted by the Company to the
underwriters in connection with the Offering. Of these amounts, $85.7 million
was used to pay the cash portion of the purchase prices relating to the
acquisitions of the Founding Companies with the remainder being used to pay
certain indebtedness of the Founding Companies.
5. EARNINGS PER SHARE:
The historical periods presented represent the results of operations of The
Woodson Companies under its historical capital structure. Accordingly, earnings
per share of The Woodson Companies are not presented as they are not
meaningful. The computation of pro forma net income per share for the nine and
three months ended September 30, 1996 and September 30, 1997, is based on
9,176,219 shares of Common Stock outstanding, which includes shares:
<TABLE>
<S> <C>
Issued to management, founders and consultants 1,256,000
Issued in consideration for acquisition of Founding Companies 2,142,441
Sold pursuant to the Offering 5,750,000
Effect of assumed exercise of Common Stock purchase warrant 27,778
---------
Shares used in computing pro forma income per share 9,176,219
=========
</TABLE>
The computation excludes options for 442,000 shares granted to management,
directors and key employees on the Offering date at an exercise price of $18
per share.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128
"Earnings Per Share," revising the methodology to be used in computing earnings
per share (EPS) requiring that the computations required for primary and fully
diluted EPS be replaced with "basic" and "diluted" EPS. The Company will adopt
SFAS No. 128 effective December 31, 1997, and will restate EPS for all periods
presented. The Company anticipates that the implementation of SFAS No. 128 will
not have a material effect on the Company's earnings per share as determined
under current accounting rules.
6. INCOME TAXES:
Commencing with the Acquisitions, the Company will be taxed at applicable
federal and state income tax rates.
The Company intends to file a consolidated federal income tax return which
includes the operations of the Founding companies for periods subsequent to the
acquisition date. The Founding Companies will each file a "short period"
federal income tax return through their respective acquisition dates.
The provision for income taxes included in the Pro Forma Statements of
Operations for the nine and three months ended September 30, 1996, and
September 30, 1997, assumes the application of statutory federal and state
income tax rates and the nondeductibility of a portion of the amortization of
goodwill.
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<PAGE> 12
7. COMMITMENTS AND CONTINGENCIES:
Legal Proceedings
The Company is currently involved in two class action lawsuits for unspecified
personal injury and property damages arising from events in October 1991 and
January 1992 during the course of a pipeline installation project for a
third-party gas transmission company. One of the class actions, involving
approximately 9,840 class members, entitled "Rivera v. United Gas Pipeline
Co.," No. 28738, was instituted against Woodson Construction Company, Inc., on
October 29, 1991, in the 40th Judicial District Court, parish of St. John the
Baptist, state of Louisiana, and the other class action, involving
approximately 7,858 class members, entitled "Husseiney v. United Gas Pipeline
Co.," No. 29089, was instituted on January 27, 1992, against Woodson
Construction Company, Inc., in the 40th Judicial District Court, parish of St.
John the Baptist, state of Louisiana. The claims of 24 representative class
members in each case were tried in 1995, and judgments were rendered against
Woodson Construction Company, Inc., which were later affirmed by the court of
appeal. In the "Rivera" lawsuit, five of the 24 representative plaintiffs were
awarded compensatory damages of $7,500 in the aggregate, but punitive damages
were denied. In the "Husseiney" lawsuit, compensatory damages of $18,589 and
punitive damages of $9,500 in the aggregate were assessed against Woodson
Construction Company, Inc., in favor of 16 of the 24 representative plaintiffs.
In both lawsuits, the compensatory damages awarded are expected to be covered
by the Company's insurance, but punitive damage awards are not expected to be
covered by insurance. The compensatory and punitive damages awarded to the 16
representative class members varied according to the representatives' proximity
to the incident and individual experience with respect to it. The amount of
compensatory and punitive damages applicable to the remaining 7,834 class
members who seek to adjudicate their damage claims will be litigated on an
individual basis. Until those remaining damage claims are finally adjudicated,
settled, dismissed or otherwise terminated, the total amount of the punitive
damages to which the Company may be subject cannot reasonably be estimated, and
there can be no assurance that it will not be materially adverse to the
Company's financial position or results of operations. In July 1997, all
parties involved applied to the Louisiana Supreme Court for further
discretionary review of the existing judgments. The Company believes that there
are meritorious arguments favorable to its position, but is unable to predict
whether the Louisiana Supreme Court will grant relief from the judgments.
The Company is involved in various other lawsuits arising in the ordinary
course of business, some of which involve substantial claims for damages. While
the outcome of these other lawsuits cannot be predicted with certainty,
management believes these other matters will not have a material adverse effect
on the consolidated financial position or results of operations of the Company.
Insurance
The Company carries a broad range of insurance coverage, including general and
business auto liability, commercial property, workers' compensation and a
general umbrella policy. The Company has not incurred significant claims or
losses on any of its insurance policies during the periods presented in the
accompanying financial statements.
-12-
<PAGE> 13
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Introduction
The following discussion should be read in conjunction with the Pro Forma
Financial Statements of the Company and related notes thereto, the Financial
Statements of TCMS, Woodson, CSI, HBH and RFCNI and related notes thereto which
are included in the Company's Registration Statement. Statements contained in
this discussion regarding future financial performance and results and other
statements that are not historical facts are forward-looking statements. The
forward-looking statements are subject to numerous risks and uncertainties to
the Company, including but not limited to, the availability of attractive
acquisition opportunities, the successful integration and profitable
management of acquired businesses, improvement of operating efficiencies, the
availability of working capital and financing for future acquisitions, the
Company's ability to grow internally through expansion of services and customer
bases and reduction of overhead, conditions in oil field services markets,
seasonality, weather conditions and other risk factors discussed in the
Registration Statement.
Results of Operations - Pro Forma
The unaudited pro forma results of operations do not purport to represent what
the Company's results of operations would actually have been if the
Acquisitions and the Offering had in fact occurred on the first day of each
period presented. Quarterly results may also be materially affected by the
timing and magnitude of acquisitions, assimilation costs, costs of opening new
facilities, gain or loss of a material customer and weather conditions.
Accordingly, the operating results for any nine or three-month period are not
necessarily indicative of the results that may be achieved for any subsequent
nine or three-month period or for a full fiscal year.
The following table sets forth certain selected proforma financial data as a
percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
Three-Month Periods Ended
---------------------------------------------
September 30, September 30,
1996 1997
-------------------- --------------------
<S> <C> <C> <C> <C>
Revenue $ 18,839 100.0% $ 32,012 100.0%
Cost of revenue 14,407 76.5 23,087 72.1
Costs and Expenses:
Selling, general and administrative 1,691 9.0 2,468 7.7
Depreciation and amortization 1,506 8.0 1,947 6.1
-------- ---- -------- -----
Operating Income $ 1,235 6.5% $ 4,510 14.1%
======== ==== ======== =====
<CAPTION>
Nine-Month Periods Ended
---------------------------------------------
September 30, September 30,
1996 1997
-------------------- --------------------
Revenue $ 55,538 100.0% $ 86,918 100.0%
Cost of revenue 43,728 78.7 66,010 75.9
Costs and Expenses:
Selling, general and administrative 4,981 9.0 6,408 7.4
Depreciation and amortization 4,510 8.1 5,602 6.4
-------- ---- -------- -----
Operating Income $ 2,319 4.2% $ 8,898 10.3%
======== ==== ======== =====
</TABLE>
-13-
<PAGE> 14
Pro Forma results for the three-months ended September 30, 1997 compared to the
three-months ended September 30, 1996
Revenue. Revenue increased $13.2 million, or 70.0% for the three months ended
September 30, 1997 compared to the three months ended September 30, 1996. The
increase resulted primarily from increased pipeline construction revenues at
Woodson and HBH. The pipeline construction revenue increase was attributable to
improved market activity in 1997.
Cost of revenue. Cost of revenue increased $8.7 million, or 60.2%. As a
percentage of revenue, cost of revenue was 72.1% for the three months ended
September 30, 1997 compared to 76.5% for the three months ended September 30,
1996. The improved margin was primarily due to reductions in standby time,
weather downtime and subcontract services.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.8 million, or 46.0%. As a percentage of
revenue, selling, general and administrative expenses were 7.7% for the three
months ended September 30, 1997 compared to 9.0% for the three months ended
September 30, 1996.
Depreciation and amortization. Depreciation and amortization expenses increased
$0.4 million, or 29.3%, for the three months ended September 30, 1997 compared
to the corresponding period in the prior year. The increase was related to
equipment purchases and acquisition of, and improvements to, M/V Discovery (a
multi-purpose service vessel) in early 1997.
Pro Forma results for the nine-months ended September 30, 1997 compared to the
nine months ended September 30, 1996
Revenue. Revenue increased $31.4 million, or 56.5%, for the nine months ended
September 30, 1997 compared to the corresponding period in the prior year. The
increase resulted primarily from improved pipeline construction activity at
Woodson and HBH. In addition, revenue increased at CSI with the newly acquired
(and recently refurbished) M/V Discovery generating most of this portion of the
increase, and at RFCNI, as a result of increased fabrication activity during
the 1997 period.
Cost of revenue. Cost of revenue increased $22.3 million, or 51.0%, for the
nine months ended September 30, 1997 compared to the corresponding period in
the prior year. The increase primarily resulted from increased costs of $17.7
million at Woodson and HBH, associated principally with increased pipeline
construction activity. In addition, costs associated with the operation of the
M/V Discovery were primarily responsible for a $3.5 million increase in cost of
revenue at CSI for the 1997 period. As a percentage of revenue, cost of revenue
was 75.9% for the nine months ended September 30, 1997 compared to 78.7% for
the corresponding period in the prior year.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $1.4 million, or 28.6%, for the nine months
ended September 30, 1997 compared to the corresponding period in the prior
year. As a percentage of revenue, selling, general and administrative expenses
were 7.4% for the nine months ended September 30, 1997 compared to 9.0% for the
corresponding period in the prior year.
Depreciation and amortization. Depreciation and amortization expenses increased
$1.1 million, or 24.2%, for the nine months ended September 30, 1997 compared
to the corresponding period in the prior year. The increase was related to
equipment purchases and the acquisition of, and improvements to, the M/V
Discovery.
-14-
<PAGE> 15
Results of Operations - TCMS
The following table sets forth certain selected financial data for TCMS
(Woodson as the accounting acquirer) as a percentage of revenues for the
periods indicated:
<TABLE>
<CAPTION>
Three-Month Periods Ended
---------------------------------------------
September 30, September 30,
1996 1997
-------------------- --------------------
<S> <C> <C> <C> <C>
Revenue $ 4,277 100.0% $ 13,886 100.0%
Cost of revenue 3,260 76.2 10,616 76.5
Costs and Expenses:
Selling, general and administrative 743 17.4 756 5.4
Depreciation and amortization 154 3.6 262 1.9
------- --------- --------- -----
Operating Income $ 120 2.8% $ 2,252 16.2%
======= ========= ========= =====
</TABLE>
<TABLE>
<CAPTION>
Nine-Month Periods Ended
---------------------------------------------
September 30, September 30,
1996 1997
-------------------- --------------------
<S> <C> <C> <C> <C>
Revenue $ 14,966 100.0% $ 31,990 100.0%
Cost of revenue 11,093 74.1 25,859 80.8
Costs and Expenses:
Selling, general and administrative 2,222 14.8 2,191
6.8
Depreciation and amortization 445 3.0 717 2.2
------- --------- --------- -----
Operating Income $ 1,206 8.1% $ 3,223 10.2%
======== ========= ======== ====
</TABLE>
Results for the three-months ended September 30, 1997 compared to the
three-months ended September 30, 1996
Revenue. Revenue increased $9.6 million, or 225% for the three months ended
September 30, 1997 compared to the three months ended September 30, 1996. The
increase is attributable to improved market activity in 1997.
Cost of revenue. Cost of revenue increased $7.4 million, or 226%. As a
percentage of revenue, cost of revenue was 76.5% for the three months ended
September 30, 1997 compared to 76.2% for the three months ended September 30,
1996.
Selling, general and administrative expenses. Selling, general and
administrative expenses were essentially unchanged for the three months ended
September 30, 1997 compared to the three months ended September 30, 1996.
Depreciation and amortization. Depreciation and amortization expenses increased
$0.1 million, or 70%, due primarily to the acquisition of equipment.
-15-
<PAGE> 16
Results for the nine-months ended September 30, 1997 compared to the
nine-months ended September 30, 1996
Revenue. Revenue increased $17.0 million, or 114%, for the nine months ended
September 30, 1997 compared to the corresponding period in the prior year. The
increase is attributable to improved market activity in 1997.
Cost of revenue. Cost of revenue increased $14.8 million, or 133%, for the nine
months ended September 30, 1997 compared to the corresponding period in the
prior year. The increase was primarily due to the increase in pipeline
construction activity in the 1997 period. As a percentage of revenue, cost of
revenue was 80.8% for the nine months ended September 30, 1997 compared to
74.1% for the corresponding period in the prior year.
Selling, general and administrative expenses. Selling, general and
administrative expenses were essentially unchanged for the nine months ended
September 30, 1997 compared to the corresponding period in the prior year. As a
percentage of revenue, selling, general and administrative expenses were 6.8%
for the nine months ended September 30, 1997 compared to 14.8% for the
corresponding period in the prior year.
Depreciation and amortization. Depreciation and amortization expenses increased
$0.3 million, or 61.1%, for the nine months ended September 30, 1997 compared
to the corresponding period in the prior year. The increase was due to the
additional property, plant and equipment placed in service in 1996 and 1997.
Liquidity and Capital Resources
During the nine-month period ended September 30, 1997, net cash used in
operating activities was $638,000, capital expenditures were $2,051,000,
proceeds from the sale of investments were $2,005,000, net proceeds from notes
payable amounted to $1,855,000 while net repayment of debt amounted to
$685,000.
On November 4, 1997, TCMS closed on the Offering, which involved the sale by
TCMS of 5,000,000 shares of Common Stock at a price to the public of $18.00 per
share. The net proceeds to TCMS from the Offering (after deducting underwriting
discounts, commissions and offering expenses) were approximately $81.6 million.
On November 4, 1997, the Company completed the sale of an additional 750,000
shares of Common Stock at a price to the public of $18.00 per share (generating
net proceeds to the Company of $12.6 million after underwriting discounts and
commissions) pursuant to an over-allotment option granted by the Company to the
underwriters in connection with the Offering. Of these amounts, $85.7 million
was used to pay the cash portion of the purchase prices relating to the
acquisitions of the Founding Companies with the remainder being used to repay
certain indebtedness of the Founding Companies.
On October 28, 1997, TCMS entered into a Credit Agreement with Joint Energy
Development Investments, Limited Partnership, an affiliate of Enron Capital &
Trade Resources Corp. (the Lender). The Credit Agreement provides for
borrowings up to $75.0 million, with the initial borrowing availability being
$50.0 million (the Initial Availability) and the remaining $25.0 million being
made available from time to time and in such amounts as the Lender shall
determine in its sole discretion. The Credit Agreement is divided into two
tranches: (a) a senior secured revolving credit facility (the Revolving Credit
Facility), providing for borrowings of up to $60.0 million ($40.0 million of
which comprises part of the Initial Availability) and (b) $15.0 million of
senior subordinated term loan borrowings (the Term Loan Facility) ($10.0
million of which comprises the remainder of the Initial Availability).
Borrowings under the Credit Agreement bear interest at LIBOR plus 275 basis
points (8.37 percent at October 3, 1997), payable quarterly, and borrowings
under the Term Loan Facility bear interest at LIBOR plus 375 basis points (9.37
percent at October 3, 1997), payable quarterly. Borrowings under the Credit
Agreement are secured by liens on substantially all the Company's assets
(including accounts receivable and after-acquired property) and a pledge of the
capital stock of the Founding Companies and each of the Company's other
subsidiaries. Borrowings under the Credit Agreement are intended to be used to
pay a portion of the aggregate purchase price for the Acquisitions and for
general corporate purposes, which may include future acquisitions. The Credit
Agreement requires the Company to comply with various loan covenants, including
(a) maintenance of certain financial ratios, (b) restrictions on additional
indebtedness and (c) restrictions on liens, guarantees, advances and dividends.
The Credit Agreement extends through October 1999 and all outstanding principal
and accrued and unpaid interest under the Revolving Credit Facility and the
Term Loan Facility as of that date is due and payable on that date. The Credit
Agreement contains mandatory prepayment provisions requiring prepayment of
outstanding borrowings from the issuance of debt or equity securities for cash
and any proceeds from other borrowings. In connection with the Credit
Agreement, the Company issued to the Lender a warrant to acquire 175,000 shares
of Common Stock at an exercise price equal to the initial per share price ($18)
to the public in the Offering. The consideration for that warrant was $1,750
and the warrant is exercisable for five years from its date of issuance.
-16-
<PAGE> 17
The Company intends to pursue acquisitions. The timing, size or success of any
acquisitions and the resulting additional capital commitments are
unpredictable. The Company expects to fund future acquisitions primarily
through a combination of issuances of additional equity, working capital, cash
flow from operations and borrowings, including the unused portion of the Credit
Facility. There can be no assurance that the Company can secure such additional
financing if and when it is needed or on terms deemed acceptable to the
Company.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDING
The Company is currently involved in two class action lawsuits for unspecified
personal injury and property damages arising from events in October 1991 and
January 1992 during the course of a pipeline installation project for a
third-party gas transmission company. One of the class actions, involving
approximately 9,840 class members, entitled "Rivera v. United Gas Pipeline
Co.," No. 28738, was instituted against Woodson Construction Company, Inc., on
October 29, 1991, in the 40th Judicial District Court, parish of St. John the
Baptist, state of Louisiana, and the other class action, involving
approximately 7,858 class members, entitled "Husseiney v. United Gas Pipeline
Co.," No. 29089, was instituted on January 27, 1992, against Woodson
Construction Company, Inc., in the 40th Judicial District Court, parish of St.
John the Baptist, state of Louisiana. The claims of 24 representative class
members in each case we tried in 1995, and judgments were rendered against
Woodson Construction Company, Inc., which were later affirmed by the court of
appeal. In the "Rivera" lawsuit, five of the 24 representative plaintiffs were
awarded compensatory damages of $7,500 in the aggregate, but punitive damages
were denied. In the "Husseiney" lawsuit, compensatory damages of $18,589 and
punitive damages of $9,500 in the aggregate were assessed against Woodson
Construction Company, Inc., in favor of 16 of the 24 representative plaintiffs.
In both lawsuits, the compensatory damages awarded are expected to be covered
by the Company's insurance, but punitive damage awards are not expected to be
covered by insurance. The compensatory and punitive damages awarded to the 16
representative class members varied according to the representatives' proximity
to the incident and individual experience with respect to it. The amount of
compensatory and punitive damages applicable to the remaining 7,834 class
members who seek to adjudicate their damage claims will be litigated on an
individual basis. Until those remaining damage claims are finally adjudicated,
settled, dismissed or otherwise terminated, the total amount of the punitive
damages to which the Company may be subject cannot reasonably be estimated, and
there can be no assurance that it will not be materially adverse to the
Company's financial position or results of operations. In July 1997, all
parties involved applied to the Louisiana Supreme Court for further
discretionary review of the existing judgments. The Company believes that there
are meritorious arguments favorable to its position, but is unable to predict
whether the Louisiana Supreme Court will grant relief from the judgments.
The Company is involved in various other lawsuits arising in the ordinary
course of business, some of which involve substantial claims for damages. While
the outcome of these other lawsuits cannot be predicted with certainty,
management believes these other matters will not have a material adverse effect
on the consolidated financial position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1997 annual meeting of shareholders was held on September 24, 1997
in Houston, Texas. Listed below are the proposals submitted to the
shareholders in the Company's Notice of Meeting dated September 8, 1997 and the
results of the shareholder votes.
Election of six directors to commence serving as directors immediately
upon election until their successors are elected and qualified:
For Against
Bill E. Stallworth 1,181,000 0
Thad Smith 1,181,000 0
Patrick B. Collins 1,181,000 0
Clifford E. McFarland 1,181,000 0
D. Glenn Richardson 1,181,000 0
Jean Savoy 1,181,000 0
Election of four directors to commence serving as directors effective
as of the successful completion of the Company's initial public offering of
common stock (November 4, 1997) until their successors are elected and
qualified:
For Against
Nathan Avery 1,181,000 0
Steven Wells 1,181,000 0
Daniel N. Hargett, Sr. 1,181,000 0
H. Daniel Hughes II 1,181,000 0
Election of certified public accountants:
For Against
Arthur Andersen LLP 1,181,000 0
ITEM 5. OTHER INFORMATION
Steven Wells, elected by the shareholders of the Company on September
24, 1997 to serve as a director of the Company effective November 4, 1997, chose
not to serve. To fill the vacancy, on November 20, 1997, the Company's Board of
Directors elected Beldon E. Fox to serve as director effective November 26, 1997
to serve until his successor is elected and qualified.
Effective November 4, 1997, the Company executed and delivered the
Share Exchange Agreement whereby Company shareholders J&D Capital Investments,
L.C., Beldon E. Fox, and James B. Thompson, Jr. exchanged an aggregate of
250,000 shares of their registered Company common stock for restricted Company
common stock effective with the closing of the Company's initial public offering
of common stock (November 4, 1997) to ensure that the shareholders of the
Woodson Companies, collectively, were the largest holder of Company common stock
entitled to vote immediately following the closing of the Company's initial
public offering of common stock.
-17-
<PAGE> 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1997 annual meeting of shareholders was held on September 24, 1997
in Houston, Texas. Listed below are the proposals submitted to the
shareholders in the Company's Notice of Meeting dated September 8, 1997 and the
results of the shareholder votes.
Election of six directors to commence serving as directors immediately
upon election until their successors are elected and qualified:
For Against
Bill E. Stallworth 1,181,000 0
Thad Smith 1,181,000 0
Patrick B. Collins 1,181,000 0
Clifford E. McFarland 1,181,000 0
D. Glenn Richardson 1,181,000 0
Jean Savoy 1,181,000 0
Election of four directors to commence serving as directors effective
as of the successful completion of the Company's initial public offering of
common stock (November 4, 1997) until their successors are elected and
qualified:
For Against
Nathan Avery 1,181,000 0
Steven Wells 1,181,000 0
Daniel N. Hargett, Sr. 1,181,000 0
H. Daniel Hughes II 1,181,000 0
Election of certified public accountants:
For Against
Arthur Andersen LLP 1,181,000 0
ITEM 5. OTHER INFORMATION
Steven Wells, elected by the shareholders on September 24, 1997 to
serve as a director of the Company effective November 4, 1997, chose not to
serve. To fill the vacancy, on November 20, 1997, the Company's Board of
Directors elected Beldon E. Fox to serve as director effective November 26,
1997 to serve until his successor is elected and qualified.
Effective November 4, 1997, the Company executed and delivered the
Share Exchange Agreement whereby Company shareholders J&D Capital Investments,
L.C., Beldon E. Fox, and James B. Thompson, Jr. exchanged an aggregate of
250,000 shares of their registered Company common stock for restricted Company
common stock effective with the closing of the Company's initial public
offering of common stock (November 4, 1997) to ensure that shareholders of the
Woodson Companies, collectively, were the largest holder of Company common
stock entitled to vote immediately following the closing of the Company's
initial public offering of common stock.
<PAGE> 19
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*3.1 -- Amended and Restated Certificate of Incorporation of TCMS.
*3.2 -- Bylaws of TCMS.
*4.1 -- Form of Certificate representing Common Stock.
4.2 -- Share Exchange Agreement among TCMS, J&D Capital Investments,
L.C., James B. Thompson and Beldon B. Fox, Jr.
*4.3 -- Secured Promissory Note to be issued in the acquisition of RFCNI.
*10.1 -- TCMS 1997 Stock Option Plan.
*10.2 -- Employment Agreement dated as of August 6, 1997, between TCMS and
Bill E. Stallworth.
*10.3 -- Employment Agreement dated as of August 6, 1997, between TCMS and
Thad Smith.
*10.4 -- Employment Agreement dated as of August 6, 1997, between TCMS and
Johnnie W. Domingue.
*10.5 -- Stock Repurchase Agreement dated as of March 24, 1997, between
TCMS and Bill E. Stallworth.
*10.6 -- Stock Repurchase Agreement dated as of April 25, 1997, between
TCMS and Thad Smith.
*10.7 -- Stock Repurchase Agreement dated as of March 24, 1997, between
TCMS and Johnnie Domingue.
*10.8 -- Form of Employment Agreement between HBH, Inc. and H. Daniel
Hughes II.
*10.9 -- Form of Employment Agreement between CSI Hydrostatic Testers,
Inc. and Daniel N. Hargett, Sr.
*10.10 -- Agreement for Consulting Services dated April 24, 1997,
between TCMS and Stallworth, Frankhouser & Associates, as amended
August 6, 1997.
*10.11 -- Employment Letter dated April 21, 1997, between TCMS and
Johnnie W. Domingue, as amended August 6, 1997.
*10.12 -- Form of warrant issued to McFarland, Grossman & Company, Inc.
*10.13 -- Purchase and Sale Agreement dated as of August 28, 1997, by and
among TCMS, Laine Construction Company, Inc., Paula Woodson,
Linda Woodson and Cheryl Woodson.
*10.14 -- Agreement and Plan of Merger dated as of August 28, 1997, by and
among TCMS, Woodson Acquisition Corp., Woodson Construction,
Inc., and Louis Woodson.
*10.15 -- Agreement and Plan of Merger dated August 28, 1997, by and among
TCMS, Kori Acquisition Corp., Kori Corporation, Paula Woodson,
Linda Woodson, and Cheryl Woodson.
*10.16 -- Agreement and Plan of Merger dated as of August 28, 1997, by and
among TCMS, Enviro Acquisition Corp., Envirosystems, Inc., Paula
Woodson, Linda Woodson, and Cheryl Woodson.
*10.17 -- Purchase and Sale Agreement dated as of August 28, 1997, among
TCMS, CSI Hydrostatic Testers, Inc., Hargett Mooring and Marine,
Inc., Daniel N. Hargett, Sr., Yvette Hargett and Richard Hargett.
*10.18 -- Purchase and Sale Agreement dated as of August 20, 1997, by and
among TCMS, HBH, Inc. and the Succession of Herbert D. Hughes.
*10.19 -- Agreement and Plan of Merger dated as of August 27, 1997, by and
among TCMS, RNI Acquisition Corp., The Red Fox Companies of New
Iberia, Inc. and The Beldon E. Fox, Sr. Grandchildren's Trust No.
1.
*10.20 -- Form of Agreement to Purchase and Sell dated as of August 28,
1997, by and among TCMS and Linda Woodson, Cheryl Woodson, and
Paula Woodson.
*10.21 -- Agreement to Purchase and Sell dated as of August 20, 1997, by
and between TCMS and the Succession of Herbert D. Hughes.
*10.22 -- Leasehold Purchase Agreement dated as of August 11, 1997, by and
between TCMS and the Beldon E. Fox, Sr. Grandchildren's Trust No.
1.
*10.23 -- Amendment and Restated Consulting and Financial Advisory Services
Agreement dated September 24, 1997, between TCMS and J&D Capital
Investments, L.C.
*10.24 -- Form of Senior Revolving Credit Agreement by and among TCMS and
Joint Energy Development Investments, Limited Partnership, and
the Lenders Signatory thereto.
*10.25 -- Form of Subordinated Credit Agreement by and among TCMS and Joint
Energy Development Investments, Limited Partnership, and the
Lenders Signatory thereto.
*10.26 -- Form of Warrant Agreement by and between TCMS and Joint Energy
Development Investments, Limited Partnership
27 -- Financial Data Schedule
* Previously filed.
(b) Reports on Form 8-K
None
-18-
<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TransCoastal Marine Services, Inc.
Dated: December 15, 1997
By: /s/ JOHNNIE W. DOMINGUE
--------------------------------
Johnnie W. Domingue
Authorized Officer
and Principal Financial
Officer
-19-
<PAGE> 21
INDEX TO EXHIBITS
Exhibit
No. Description
------ -----------
*3.1 -- Amended and Restated Certificate of Incorporation of TCMS.
*3.2 -- Bylaws of TCMS.
*4.1 -- Form of Certificate representing Common Stock.
4.2 -- Share Exchange Agreement among TCMS, J&D Capital Investments,
L.C., James B. Thompson and Beldon B. Fox, Jr.
*4.3 -- Secured Promissory Note to be issued in the acquisition of RFCNI.
*10.1 -- TCMS 1997 Stock Option Plan.
*10.2 -- Employment Agreement dated as of August 6, 1997, between TCMS and
Bill E. Stallworth.
*10.3 -- Employment Agreement dated as of August 6, 1997, between TCMS and
Thad Smith.
*10.4 -- Employment Agreement dated as of August 6, 1997, between TCMS and
Johnnie W. Domingue.
*10.5 -- Stock Repurchase Agreement dated as of March 24, 1997, between
TCMS and Bill E. Stallworth.
*10.6 -- Stock Repurchase Agreement dated as of April 25, 1997, between
TCMS and Thad Smith.
*10.7 -- Stock Repurchase Agreement dated as of March 24, 1997, between
TCMS and Johnnie Domingue.
*10.8 -- Form of Employment Agreement between HBH, Inc. and H. Daniel
Hughes II.
*10.9 -- Form of Employment Agreement between CSI Hydrostatic Testers,
Inc. and Daniel N. Hargett, Sr.
*10.10 -- Agreement for Consulting Services dated April 24, 1997,
between TCMS and Stallworth, Frankhouser & Associates, as amended
August 6, 1997.
*10.11 -- Employment Letter dated April 21, 1997, between TCMS and
Johnnie W. Domingue, as amended August 6, 1997.
*10.12 -- Form of warrant issued to McFarland, Grossman & Company, Inc.
*10.13 -- Purchase and Sale Agreement dated as of August 28, 1997, by and
among TCMS, Laine Construction Company, Inc., Paula Woodson,
Linda Woodson and Cheryl Woodson.
*10.14 -- Agreement and Plan of Merger dated as of August 28, 1997, by and
among TCMS, Woodson Acquisition Corp., Woodson Construction,
Inc., and Louis Woodson.
*10.15 -- Agreement and Plan of Merger dated August 28, 1997, by and among
TCMS, Kori Acquisition Corp., Kori Corporation, Paula Woodson,
Linda Woodson, and Cheryl Woodson.
*10.16 -- Agreement and Plan of Merger dated as of August 28, 1997, by and
among TCMS, Enviro Acquisition Corp., Envirosystems, Inc., Paula
Woodson, Linda Woodson, and Cheryl Woodson.
*10.17 -- Purchase and Sale Agreement dated as of August 28, 1997, among
TCMS, CSI Hydrostatic Testers, Inc., Hargett Mooring and Marine,
Inc., Daniel N. Hargett, Sr., Yvette Hargett and Richard Hargett.
*10.18 -- Purchase and Sale Agreement dated as of August 20, 1997, by and
among TCMS, HBH, Inc. and the Succession of Herbert D. Hughes.
*10.19 -- Agreement and Plan of Merger dated as of August 27, 1997, by and
among TCMS, RNI Acquisition Corp., The Red Fox Companies of New
Iberia, Inc. and The Beldon E. Fox, Sr. Grandchildren's Trust No.
1.
*10.20 -- Form of Agreement to Purchase and Sell dated as of August 28,
1997, by and among TCMS and Linda Woodson, Cheryl Woodson, and
Paula Woodson.
*10.21 -- Agreement to Purchase and Sell dated as of August 20, 1997, by
and between TCMS and the Succession of Herbert D. Hughes.
*10.22 -- Leasehold Purchase Agreement dated as of August 11, 1997, by and
between TCMS and the Beldon E. Fox, Sr. Grandchildren's Trust No.
1.
*10.23 -- Amendment and Restated Consulting and Financial Advisory Services
Agreement dated September 24, 1997, between TCMS and J&D Capital
Investments, L.C.
*10.24 -- Form of Senior Revolving Credit Agreement by and among TCMS and
Joint Energy Development Investments, Limited Partnership, and
the Lenders Signatory thereto.
*10.25 -- Form of Subordinated Credit Agreement by and among TCMS and Joint
Energy Development Investments, Limited Partnership, and the
Lenders Signatory thereto.
*10.26 -- Form of Warrant Agreement by and between TCMS and Joint Energy
Development Investments, Limited Partnership
27 -- Financial Data Schedule
* Previously filed.
<PAGE> 1
EXHIBIT 4.2
================================================================================
SHARE EXCHANGE AGREEMENT
BY AND AMONG
TRANSCOASTAL MARINE SERVICES, INC.
A DELAWARE CORPORATION
J & D CAPITAL INVESTMENTS, L.C.,
A NEVADA LIMITED LIABILITY COMPANY
JAMES B. THOMPSON
AND
BELDON E. FOX, JR.
______________, 1997
================================================================================
<PAGE> 2
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is made this ____ day of
__________, 1997 (the "Effective Date"), between TRANSCOASTAL MARINE SERVICES,
INC., a Delaware corporation (the "Company"), J & D Capital Investments, L.C.,
a Nevada limited liability company ("J & D"), James B. Thompson ("Thompson"),
and Beldon E. Fox, Jr. ("Fox") (collectively, J & D, Thompson and Fox shall be
referred to herein as the "Founders").
WHEREAS, each Founder holds shares of the Company's common stock, par
value $.001 per share (collectively, "Founder Common Stock");
WHEREAS, the Company has entered into an Agreement and Plan of Merger with
each of Woodson Construction Company, Inc., a Louisiana corporation
("Woodson"), Kori Corporation, a Louisiana corporation ("Kori"), and
Envirosystems, Inc., a Louisiana corporation ("Envirosystems"), and a Purchase
and Sale Agreement with Laine Construction Company, Inc., a Louisiana
corporation ("Laine") (collectively, Woodson, Kori, Envirosystems and Laine
shall be referred to herein as the "Woodson Companies," the Company's
acquisition of the Woodson Companies is the "Woodson Acquisition"); and
WHEREAS, as consideration for the acquisition of the Woodson
Companies, the Founders have agreed upon the occurrence of certain conditions
to exchange their outstanding common stock, par value $.001 per share ("Common
Stock"), of the Company for restricted common stock of the Company, par value
$.001 ("Restricted Common Stock");
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, and intending to be legally bound
hereby, the parties agree as follows:
1. THE EXCHANGE
1.1. The Exchange. The Founders hereby agree to exchange any and all
shares of Founders Common Stock for Restricted Common Stock effective
immediately following the Woodson Acquisition as required to ensure that the
aggregate voting power of all Common Stock received by all shareholders of the
Woodson Companies in the Woodson Acquisition would exceed the aggregate voting
power of the Founders (the "Exchange"). The Exchange shall be consummated in
the event, but only in the event that the Company successfully completes its
IPO (as defined below) within one year from the Effective Date, and only to the
extent that the aggregate voting power of all Founder Common Stock would exceed
the aggregate voting power of all Common Stock received by shareholders of the
Woodson Companies in the Woodson Acquisition but for the Exchange. In such
event, the Exchange shall be deemed to occur automatically and without any
further action on the part of any person with respect to shares of Common Stock
held by each Founder, pro rata, in proportion to the total number of shares of
Common Stock held by all such Founders, effective as of the successful
completion of the IPO. The closing (the "Closing") will take place at 9:00
a.m. at the offices of Chamberlain, Hrdlicka, White, Williams & Martin in
Houston, Texas contemporaneously with the Closing of the Company's IPO (the
"Closing Date"). At the Closing, the Founders shall deliver to the Company
certificates representing the Founder Common Stock, and
<PAGE> 3
a completed letter of transmittal for each Founder, and the Company shall
deliver to the Founders, allocated in proportion to their respective holdings
of Founder Common Stock as set forth on Exhibit 1.1 to this Agreement,
certificates evidencing 975,000 shares in the aggregate of Common Stock and
Restricted Common Stock, and each Founder shall receive the same number of
shares delivered to the Company, and substantially the same ratio of Common
Stock to Restricted Common Stock as each of the other Founders, subject to any
adjustments for any stock dividend, subdivision, reclassification,
recapitalization, split-up, combination, or exchange of shares or the like.
For purposes of this Agreement, the term "IPO" means the first underwritten
public offering of the Company's common stock, $.001 par value ("Common
Stock"), other than any offering pursuant to any registration statement (i)
relating to any capital stock of the Company or options, warrants or other
rights to acquire any such capital stock issued or to be issued primarily to
directors, officers or employees of the Company, or any of its subsidiaries
(ii) relating to any employee benefit plan or interest therein, (iii) relating
principally to any preferred stock or debt securities of the Company, or (iv)
filed pursuant to Rule 145 under the Securities Act of 1933, as amended, or any
successor or similar provisions.
2. REPRESENTATIONS AND WARRANTIES
OF THE FOUNDERS
2.1. The Founders, jointly and severally, hereby represent and warrant
to the Company as follows:
2.1.1. Stock Ownership. Each Founder owns, beneficially and of
record, with full power to vote, the number of shares of Founder Common Stock
set forth beside such Founder's name on Exhibit 1.1 and such shares are so held
by the Founders free and clear of all liens, encumbrances and claims
whatsoever.
2.1.2. Authority. Each Founder has full right, power, legal
capacity and authority to (i) execute, deliver and perform this Agreement, and
all other documents and instruments referred to herein or contemplated hereby
to be executed, delivered and performed by the Founders (each a "Founder
Related Document") and (ii) consummate the transactions contemplated herein and
thereby. This Agreement has been duly executed and delivered by each Founder
and constitutes, and each Founder Related Document, when duly executed and
delivered by each Founder who is a party thereto will constitute, legal, valid
and binding obligations of such Founder enforceable against such Founder in
accordance with their respective terms and conditions, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (whether applied in a proceeding
at law or in equity).
2.1.3. Consents. No approval, consent, order or action of or
filing with any court, administrative agency, governmental authority or other
third party is required for the execution, delivery or performance by the
Founders of this Agreement or any Founder Related Document. The execution,
delivery and performance by each Founder of this Agreement and the Founder
Related Documents do not violate any mortgage, indenture, contract, agreement,
lease or commitment or other instrument of any kind to which such Founder is a
party or by which such Founder or such Founder's assets or properties may be
bound or affected or any law, rule or regulation applicable to
<PAGE> 4
such Founder or any court injunction, order or decree or any valid and
enforceable order of any governmental agency in effect as of the date hereof
having jurisdiction over such Founder.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1. Representations and Warranties. The Company hereby represents
and warrants to the Founders as follows:
3.1.1. Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company is duly qualified or licensed as a foreign corporation
authorized to do business in all states in which any of its assets or
properties may be situated or where its business is conducted except where the
failure to obtain such qualification or license would not have a material
adverse effect.
3.1.2. Capitalization of the Company. As of the date hereof,
the total authorized capital stock of the Company is 20,000,000 shares of
Common Stock, of which 1,256,000 shares are issued and outstanding and of which
0 shares are held in the treasury of the Company, 2,000,000 shares of Preferred
Stock, $.001 par value, of which 0 shares are issued and outstanding and 0
shares are held in the treasury of the Company, and 3,000,000 shares of
Restricted Common Stock, of which 0 shares are issued and outstanding and 0
shares are held in the treasury of the Company. The outstanding shares of
Common Stock have been duly and validly issued and are fully paid and
non-assessable.
3.1.3. Authority. The Company has full right, power, legal
capacity and authority to execute, deliver and perform this Agreement and all
documents and instruments referred to herein or contemplated hereby and to
consummate the transactions contemplated herein and thereby (the "Company
Related Documents"). This Agreement has been duly executed and delivered by
the Company and constitutes, and all the Company Related Documents, when
executed and delivered by the Company will constitute, legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms and conditions except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether applied in a proceeding at law or in equity).
3.1.4. Consents. No approval, consent, order or action of or
filing with any court, administrative agency, governmental authority or other
third party is required for the execution, delivery or performance by the
Company of this Agreement or the Company Related Documents or the consummation
by the Company of the transactions contemplated hereby.
4. SURVIVAL, INDEMNIFICATIONS
4.1. Survival. The representations and warranties set forth in this
Agreement and the other documents, instruments and agreements contemplated
hereby shall survive for a period of twelve (12) months after the date hereof
(the "Survival Period"). The liabilities of the parties under their respective
representations and warranties shall expire as of the expiration of the
Survival Period and
<PAGE> 5
no claim for indemnification may be made with respect to any breach of any
representation or warranty, except to the extent that written notice of such
breach shall have been given to the party against which such claim is asserted
on or before the date of such expiration. The covenants and agreements of the
parties herein and in other documents and instruments executed and delivered in
connection with the closing of the transactions contemplated hereby shall
survive for the maximum period permitted by law.
4.2. Indemnification.
4.2.1. The Company Indemnified Parties. Subject to the
provisions of Sections 4.1 hereof, the Founders, jointly and severally, shall
indemnify, save and hold harmless the Company and any of its assignees
(including lenders) and all of its respective officers, directors, employees,
representatives, agents, advisors and consultants and all of its respective
heirs, legal representatives, successors and assigns (collectively the "Company
Indemnified Parties") from and against any and all damages, liabilities,
losses, claims, deficiencies, penalties, interest, expenses, fines,
assessments, charges and costs, including reasonable attorneys' fees and court
costs (collectively "Losses") arising from, out of or in any manner connected
with or based on:
(i) the breach of any covenant of any Founder or the failure
by the Founders to perform any obligation of any Founder contained herein
or in any Founder Related Document; and
(ii) any inaccuracy in or breach of any representation or
warranty of any Founder contained herein or in any Founder Related
Document.
The foregoing indemnities shall not limit or otherwise adversely affect the
rights of indemnity of the Founders Indemnified Parties (as defined below) for
Losses under Section 4.2.2.
4.2.2. The Company Indemnity. Subject to the provisions of
Sections 4.1, the Company shall indemnify, save and hold harmless the Founders
and the Founders' heirs, legal representatives, successors and assigns (the
"Founder Indemnified Parties") from and against all Losses arising from, out of
or in any manner connected with or based on:
(i) any breach of any covenant of the Company or the failure
by the Company to perform any obligation of the Company contained herein
or in the Company Related Documents; and
(ii) any inaccuracy in or breach of any representation or
warranty of the Company contained herein or in the Company Related
Documents.
The foregoing indemnities shall not limit or otherwise adversely affect the
Company Indemnified Parties' rights of indemnity for Losses under Section
4.2.1.
4.3. Notice. The party (the "Indemnified Party") which may be
entitled to indemnity hereunder shall give prompt notice to the party obligated
to give indemnity hereunder (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any suit, action or
<PAGE> 6
proceeding in respect of which indemnity may be sought hereunder. Any failure
on the part of any Indemnified Party to give the notice described in this
Section 5.3 shall relieve the Indemnifying Party of its obligations under this
Article 5 only to the extent that such Indemnifying Party has been prejudiced
by the lack of timely and adequate notice. The Company shall have the
obligation to assume the defense or settlement of any third-party claim, suit,
action or proceeding in respect of which indemnity may be sought hereunder,
provided that (i) the Founders shall at all times have the right, at their
option, to participate fully therein, and (ii) if the Company does not proceed
diligently to defend the third-party claim, suit action or proceeding within
ten (10) days after receipt of notice of such third-party claim, suit, action
or proceeding, the Founders shall have the right, but not the obligation, to
undertake the defense of any such third-party claim, suit, action or
proceeding. The Indemnifying Party shall not be required to indemnify the
Indemnified Party with respect to any amounts paid in settlement of any
third-party suit, action, proceeding or investigation entered into without the
written consent of the Indemnifying Party; provided, however, that if the
Indemnified Party is a the Company Indemnified Party, such third-party suit,
action, proceeding or investigation may be settled without the consent of the
Indemnifying Party on ten (10) days' prior written notice to the Indemnifying
Party if such third-party suit, action, proceeding or investigation is then
unreasonably interfering with the business or operations of the Company and the
settlement is commercially reasonable under the circumstances; and provided
further, that if the Indemnifying Party gives ten (10) days' prior written
notice to the Indemnified Party of a settlement offer which the Indemnifying
Party desires to accept and to pay all Losses with respect thereto ("Settlement
Notice") and the Indemnified Party fails or refuses to consent to such
settlement within ten (10) days after delivery of the Settlement Notice to the
Indemnified Party, and such settlement otherwise complies with the provisions
of this Section 4.3, the Indemnifying Party shall not be liable for Losses
arising from such third-party suit, action, proceeding or investigation in
excess of the amount proposed in such settlement offer. Notwithstanding the
foregoing, no Indemnifying Party will consent to the entry of any judgment or
enter into any settlement without the consent of the Indemnified Party, if such
judgment or settlement imposes any obligation or liability upon the Indemnified
Party other than the execution, delivery or approval thereof and customary
releases of claims with respect to the subject matter thereof. The parties
shall cooperate in defending any such third-party suit, action, proceeding or
investigation, and the defending party shall have reasonable access to the
books and records, and personnel in the possession or control of the
Indemnified Party which are pertinent to the defense. The parties agree that
the Indemnified Party may join the Indemnifying Party in any suit, action,
claim or proceeding brought by a third party, as to which any right of
indemnity created by this Agreement would or might apply, for the purpose of
enforcing any right of the indemnity granted to such Indemnified Party pursuant
to this Agreement.
5. MISCELLANEOUS
5.1. Notice. Any notice, delivery or communication required or
permitted to be given under this Agreement shall be in writing, and shall be
mailed, postage prepaid, or delivered, to the addresses given below, or sent by
telecopy to the telecopy numbers set forth below, as follows:
<PAGE> 7
To the Founders:
J & D Capital Investments, L.C.
c/o Mr. G. Darcy Klug
505 Lorie Avenue, Suite I
Lafayette, Louisiana 70507
Telecopy: (318) 896-0034*
Mr. Beldon E. Fox, Jr.
c/o The Red Fox Companies of New Iberia, Inc.
4506 South Lewis Street
New Iberia, Louisiana 70560
Telecopy: (318) 367-1756
Mr. James B. Thompson
c/o TransCoastal Marine Services, Inc.
3535 Briarpark, Suite 210
Houston, Texas 77042
Telecopy: (713) 781-6364
To the Company:
TransCoastal Marine Services, Inc.
3535 Briarpark, Suite 210
Houston, Texas 77042
Attention: President
Telecopy: (713) 781-6364
or other such address as shall be furnished in writing by any such party to the
other party, and such notice shall be effective and be deemed to have been
given as of the date actually received.
To the extent any notice provision in any other agreement, instrument or
document required to be executed or executed by the parties in connection with
the transactions contemplated herein contains a notice provision which is
different from the notice provision contained in this Section 5.1 with respect
to matters arising under such other agreement, instrument or document, the
notice provision in such other agreement, instrument or document shall control.
5.2. Further Documents. The Founders shall, at any time and from time
to time after the date hereof, upon request by the Company and without further
consideration, execute and deliver such instruments or other documents and take
such further action as may be reasonably required in order to perfect any other
undertaking made by the Founders hereunder.
5.3. Assignability. No Founder shall assign this Agreement in whole
or in part without the prior written consent of the Company, except by the
operation of law. The Company may assign its rights under this Agreement and
the Founder Related Documents without the consent of either Founder.
<PAGE> 8
5.4. Exhibits and Schedules. The Exhibits and Schedules (and any
appendices thereto) referred to in this Agreement are and shall be incorporated
herein and made a part hereof.
5.5. Entire Agreement. This Agreement constitutes the full
understanding of the parties, a complete allocation of risks between them and a
complete and exclusive statement of the terms and conditions of their agreement
relating to the subject matter hereof and supersedes any and all prior
agreements, whether written or oral, that may exist between the parties with
respect thereto. Except as otherwise specifically provided in this Agreement,
no conditions, usage of trade, course of dealing or performance, understanding
or agreement purporting to modify, vary, explain or supplement the terms or
conditions of this Agreement shall be binding unless hereafter made in writing
and signed by the party to be bound, and no modification shall be effected by
the acknowledgment or acceptance of documents containing terms or conditions at
variance with or in addition to those set forth in this Agreement. No waiver
by any party with respect to any breach or default or of any right or remedy
and no course of dealing shall be deemed to constitute a continuing waiver of
any other breach or default or of any other right or remedy, unless such waiver
be expressed in writing signed by the party to be bound. Failure of a party to
exercise any right shall not be deemed a waiver of such right or rights in the
future.
5.6. Headings. Headings as to the contents of particular articles and
sections are for convenience only and are in no way to be construed as part of
this Agreement or as a limitation of the scope of the particular articles or
sections to which they refer.
5.7. CONTROLLING LAW AND JURISDICTION. THE VALIDITY, INTERPRETATION
AND PERFORMANCE OF THIS AGREEMENT AND ANY DISPUTE CONNECTED HEREWITH SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
5.8. No Third Party Beneficiaries. No person or entity not a party to
this Agreement shall have rights under this Agreement as a third party
beneficiary or otherwise.
5.9. Amendments and Waivers. This Agreement may be amended by the
Company and the Founders; provided that all amendments to this Agreement must
be by an instrument in writing signed on behalf of the Company and by the
Founders. Any term or provision of this Agreement may be waived in writing at
any time by the party which is entitled to the benefits thereof.
5.10. Non-Recourse. No recourse for the payment of any amounts due
hereunder or for any claim based on this Agreement or the transactions
contemplated hereby or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Company in this Agreement
shall be had against any incorporator, organizer, promoter, Founder, officer,
director, employee or representative as such (other than the Founders as set
forth herein), past, present or future, of the Company or of any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by enforcement of any assessment or penalty or otherwise; it being expressly
<PAGE> 9
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Agreement.
5.11. When Effective. This Agreement shall become effective only upon
the execution and delivery of one or more counterparts of this Agreement by
each of the Company and the Founders.
5.12. Number and Gender of Words. Whenever herein the singular number
is used, the same shall include the plural where appropriate and words of any
gender shall include each other gender where appropriate.
5.13. Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under present or future laws, such
provisions shall be fully severable as if such invalid or unenforceable
provisions had never comprised a part of the Agreement; and the remaining
provisions of the Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of such illegal, invalid
or unenforceable provision, there shall be automatically as a part of this
Agreement, a provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
5.14. Multiple Counterparts. This Agreement may be executed in a
number of identical counterparts. If so executed, each of such counterparts is
to be deemed an original for all purposes and all such counterparts shall,
collectively, constitute one agreement, but, in making proof of this Agreement,
it shall not be necessary to produce or account for more than one such
counterpart.
5.15. No Rule of Construction. All of the parties hereto have been
represented by counsel in the negotiations and preparation of this Agreement;
therefore, this Agreement will be deemed to be drafted by each of the parties
hereto, and no rule of construction will be invoked respecting the authorship
of this Agreement.
5.16. Expenses. Each of the parties shall bear all of their own
expenses in connection with the negotiation and closing of this Agreement and
the transactions contemplated hereby.
[SIGNATURES ON FOLLOWING PAGE]
<PAGE> 10
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered on
the date first hereinabove written.
THE COMPANY:
TRANSCOASTAL MARINE SERVICES, INC., a
Delaware corporation
By: /s/ BILL STALLWORTH
------------------------------------------
Bill Stallworth, Chief Executive Officer
FOUNDERS:
J & D Capital Investments, L.C.
By: /s/ G. DARCY KLUG
-------------------------------------------
G. Darcy Klug, President
/s/ JAMES B. THOMPSON
----------------------------------------------
James B. Thompson (Individually)
/s/ BELDON E. FOX, JR.
----------------------------------------------
Beldon E. Fox, Jr. (Individually)
<PAGE> 11
EXHIBIT 1.1
(TO SHARE EXCHANGE AGREEMENT)
HOLDERS OF FOUNDER COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
FOUNDER FOUNDER COMMON STOCK
------- --------------------
<S> <C>
J & D Capital 800,000 shares
Investments, L.C.
James B. Thompson 100,000 shares
Beldon E. Fox, Jr. 75,000 shares
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,660
<SECURITIES> 128
<RECEIVABLES> 15,372
<ALLOWANCES> 0
<INVENTORY> 460
<CURRENT-ASSETS> 29,322
<PP&E> 63,816
<DEPRECIATION> 0
<TOTAL-ASSETS> 163,202
<CURRENT-LIABILITIES> 17,950
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 163,202
<SALES> 0
<TOTAL-REVENUES> 86,918
<CGS> 0
<TOTAL-COSTS> 66,010
<OTHER-EXPENSES> 12,010
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 724
<INCOME-PRETAX> 7,743
<INCOME-TAX> 3,590
<INCOME-CONTINUING> 4,153
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,153
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
